7:46 am, February 28, 2023
Suzuki UK boss Dale Wyatt has laid out the pros and cons for agency sales in a detailed online post.
Ahead of his appearance at next week’s Car Dealer Live – where Wyatt will join other car manufacturer chiefs to discuss the future of the industry – he decided to think in detail about agency sales.
Wyatt posted a lengthy LinkedIn post at the weekend saying he’d been giving agency sales a lot of thought ahead of his panel discussion at the event which takes place next Thursday (March 9) at the British Motor Museum in Gaydon.
Mercedes rolled out its direct-to-consumer sales model at the turn of the year. Its dealers are said to be paid a five per cent handling fee, plus finance commission for each sale.
Plenty of other car makers are planning to follow suit including Stellantis, VW Group and Volvo. yesterday, one expert told Car Dealer it was ‘still unclear’ whether car dealers could make money from agency sales.
Wyatt’s post broke down the argument for agency into the upsides and downsides for car manufacturers and their dealers.
Wyatt said the manufacturer upsides included:
- Gross margin improvement
- Transparent dynamic pricing
- Consistent customer journey
- Real-time customer behaviour insights
- Through the line marketing
- Improved stock utilisation
- Enhanced Data Capture
- CRM and Enquiry Management
- BI and MI /360 view of the customer
- Used car revenue / F&I revenue*
- Connected car & subscription revenue*
- Enables dealer free e-commerce*
- Uncouples dependency of a dealer in the supply chain*
And he said the manufacturer downsides were:
- Requires huge cultural change
- Redundancies / New people and skills
- Balance sheet impact
- Reduces the RV management toolkit
- Significant investment in IT / Systems / Processes
- Demonstrators / Courtesy car provision
- Stocking costs / FCA implications
- Regional pricing?
- Used car part exchange risk
- Reduces the ability to performance manage dealers
- Unproven business model
- Potential need for leadership change?
- Legacy systems / legacy mindset
- Local person v call centre in the ivory tower
Wyatt added: ‘I think all of the items in the (upsides) list with the exception of those that I have marked with an asterisk are possible to achieve through a franchise agreement.’
Wyatt also detailed his thoughts on the likely response from car dealers forced down the agency route and the risks that would expose the manufacturer too.
He said he thought dealers might switch their focus to used car sales, reduce their new car advertising and there was a risk of those with a dual franchise to simply switch sales to the other car brand in their showroom.
He also highlighted the fact customer issues are likely to be directed to the car manufacturer.
Moving on to the pros and cons for car dealers, Wyatt said he could see a few on both sides.
Dealer Upside
- Nil stocking costs
- Nil new car marketing costs
- Nil new goodwill costs
- Nil new car debt
- Nil demo write down
- Level playing field pricing / stock
Dealer Downside
- Fixed margin reduction
- Nil volume bonus
- Nil manufacturer registration bonus
- Risk re quality bonus failure
- Manufacturer responsible for generating customer demand
- Loss of new car F&I income?
Wyatt added: ‘On balance, I can see why a new entrant without legacy systems and a dealer network would opt for the agency route and there could be an argument for niche prestige brands, but I fail to see a compelling argument from the traditional manufacturer viewpoint.’
Wyatt will be joined by Jonathan Goodman, from Polestar and MG’s Guy Pigounakis at next week’s Car Dealer Live, sponsored by Auto Trader.
The session will be covering the changing face of car sales – from agency sales to the transition to EVs ahead of the 2030 ban.
There are a handful of in-person tickets remaining and unlimited streaming tickets for sale. As well as watch live, streaming tickets will allow users to watch back the sessions and download accompanying material supplied by our partners after the event.
Google, Cox Automotive and Close Brothers Motor Finance will all be delivering exclusive research at the event, Cambria boss Mark Lavery is the headline interview, while panels of franchised and independent dealers will discuss the future of the car dealer.
